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Renovating the charred remains of the Forest Arms apartment building seems a foreboding task. But that's not stopping Scott Lowell and his team from bringing what is arguably Midtown's most beautiful apartment building back to life.

The plans call for gutting the 100-year-old structure to create about 70 apartments and space for at least two businesses. A number of environmentally friendly features will be incorporated into the project, including solar panels. Lowell and his partners will spend about $9 million to breathe new life into a building that burned a year ago and has gone through two freeze-thaw cycles since that time without a roof. It's a feat that would be much harder, if not impossible, without Michigan's newly expanded tax credits.

"They make the Forest Arms possible," Lowell says. "They're essential for any development project beyond a certain size, such as a single-family home."

Banking on history

Such historic tax credits have played major roles in some of Detroit's biggest job-creating economic developments, such as the Book Cadillac and Fort Shelby hotel renovations. They are a key part in the plans to save part of Tiger Stadium, Grand Army of the Republic (GAR) building and countless other projects that have grabbed a few headlines in Detroit."(The tax credits) will have a big impact on stimulating development," says Abraham Kadashin, principal of Kadushin Associates Architects Planners, an Ann Arbor firm that has worked on a number of renovation projects in Detroit. "It will be a big help in renovating Detroit's building stock."

Michigan has had tax credits for renovating historic properties for years. These state tax credits could pay for up to 20 percent of a project's costs. There are also federal tax credits that could compensate for another 20 percent. However, Michigan's old law said developers could only combine the two for 25 percent of a project's total costs.

The new historic tax credits law -- passed late last year and sponsored by former Detroit Rep. Steve Tobocman -- allows developers to utilize both state and federal tax credits so they can add up to 40 percent of the project's total cost in core cities on a case-by-case basis determined by the state. Add in brownfield tax credits (buildings that have become "obsolete" because of their age can qualify) and, simply put, about half of the project's total costs can be recouped by the developer.

"For the developers that are using them, it's a boon," says Blair McGowan, a prominent local preservationist and developer. "Frankly, it's a gold mine if you have an older building in an older community."

McGowan is an expert on utilizing these tax credits. He has restored a number of historic buildings into well-known viable businesses, such as Clutch Cargo's in Pontiac and St. Andrew's Hall in downtown Detroit. His latest project, the Crofoot in downtown Pontiac, used a number of these tax credits to turn a historic building about to meet the wrecking ball into Metro Detroit's newest concert venue.

"If you have a historic renovation, you have 50 percent of it paid for not by the city or the Detroit Economic Growth Corporation (DEGC), but by the federal and state government," McGowan says. Old trumps new

This makes "rebuilding old" more attractive than "building new" when it comes to the bottom line. Most of Detroit's recent home runs when it comes to economic development have involved doing something with older properties. The rebirth of the Book Cadillac Hotel has grabbed the most headlines, but there is also the Fort Shelby Hotel, Kales Building, Guardian Building, Lofts@Woodward, Cheli's, Gem Theater, Iodent Building and the building that houses Park Bar and Cliff Bell's. And there are more in the works. All of the movie studios planned for the area involve reusing existing buildings.

"There is huge value in these old buildings," McGowan says.

In the meantime, the lots where Hudson's, Madison-Lennox, Statler Hotel, Wolverine Hotel and Motown headquarters once stood still stand vacant and in most cases blighted. The Detroit Downtown Development Authority is working with the Ilitch family to raze even more buildings in Foxtown to make way for more surface parking lots for future development. The Detroit Economic Growth Corporation is also looking at tearing down the Lafayette Building.

This all raises the question: Is there more economic opportunity in shopping around a unique historic property or creating another vacant lot in a city overflowing with them?

McGowan chalks such behavior up to local officials, landowners and developers unwilling to step out of a comfort zone where the conventional wisdom says build strip malls on cornfields instead of restoring storefronts in city centers.

"There are developers and city officials that are unable or unwilling to use the tools the government and legislature made available to them," McGowan says. "Why they do it, I don't know."

The Forest for the trees

Would something be built where the Forest Arms now stands if it were torn down? Maybe, because of its proximity to Wayne State University. But no new buildings are being built in the neighborhood, not counting university projects.

"New construction, I don't see it," Lowell says.

And why would the university be interested in building something right away on the Forest Arms site when it already owns a bevy of surface lots that already are in line for redevelopment? And what would another vacant lot do for a community trying to recreate itself as dense, vibrant and urban?

"I think when you knock down a building, it's equivalent to knocking out one of your front teeth," McGowan says. "When people look at you, they might like that you're smiling but (they notice) something is obviously missing."

Michigan's new historic tax credits are partially aimed at helping prevent the creation of such holes in the urban fabric. They're also meant to help spur more investment and job creation. Renovation projects create many more permanent jobs than the few temporary jobs created by demolition.

Plus, who is to say a new apartment building built in place of the Forest Arms would be as valuable to the community?

"Would it be possible to level the Forest Arms and build new? Maybe," Lowell says. "But you wouldn't have the historic tax credits to use if you did."